How To Read Your Financial Aid Letter?

Financial Aid is basically the monetary benefits that you get to pay for your education. It is also equally important that you understand how to read your financial aid letter. In this article, learn more about how you read the aid letter, how important it is, and what can do.

TCM Staff

30th March 2020

If you are thinking that the answer to your question will be given in word saying this is how much you will be provided, then it's a NO.

You may have noticed that many schools don’t include the cost of tuition in financial aid award letters. Yet information will be given in detail with respect to scholarships and grants you have been allotted.

Here is an article that gives you a useful and clear vision of the financial aid award letter.

What is a financial aid award letter?

It is a letter in the document form sent from a college or university to a student to understand everything about how much monetary support a registrant is eligible for.

Once the student registers for the FAFSA - Free Application for Federal Student Aid, it might take from 5 days to 6 weeks for the application to be processed by the U.S. Department of Education which depends on whether the form is filled on FAFSA online or on paper. An email address on the FAFSA and signed the form electronically with an FSA ID will be provided in order to log in.

The student will receive a Student Aid Report (SAR) that consists of the student’s EFC - Expected Family Contribution. simultaneously, the universities mentioned on the FAFSA will receive an Institutional Student Information Record (ISIR) consisting of the student’s EFC and other information.

Most financial aid award letters arrive either simultaneously or shortly after the student receives an offer of admission, typically in late March or early April. Technically, students will have very little time to compare their preferences and select a suitable college for them before making a decision by May 1 which is considered to be National Decision Day.

Interpretation of Financial Aid 
The actual cost of college is revealed in the net price. The net price is the difference between total college costs and just the gift aid.

Gift aid consists of scholarships and grants whereas net prices involve loans, EFC, employment and unmet need. 

To be clear, the net price and net cost are two different things. The net cost is the difference between total college costs and the entire financial aid package. But the financial aid package includes loans, which do not cut college costs. The actual costs will be higher than the net cost.

Comparison of institutes based on the net price
It is said that comparing the colleges with respect to net price and net cost will give you a clear idea to choose a college. The net cost will be approximately the same for most of the colleges, while the net price will help discriminate among colleges according to the provided financial aid packages. Schools with a lower cost of attendance and higher grants will tend to have a lower net price.

Ordinarily, if two colleges have a net price that differs by $1,000 or less, it will not affect much about the choice of college. But if the net price differs by more than $6,000, most families will choose the less expensive college. 

The net price corresponds with the sum amount of student loan debt at graduation. One of the best ways to reduce debt to choose the college with the most economical net price.

Sample award letter  
There are different ways of these letters. We have chosen a sample letter which is an improved version of it with an explanation of what to read and how to read.

We can see the estimated cost of attendance (COA) is $42,100, including tuition and fees, room and board, books, travel, and personal expenses. This institution has done useful work for us by providing all of these numbers right on the award letter.

The award package lists total aid as $29,200.

Why is it needed?

It is important to know the different types of financial aids you will be awarded as this letter will accordingly provide you details of the aid you have been given. There are a few necessary pieces of information included in the award letter which will definitely help your family understand how much they will have to pay and their responsibilities.

  • The cost of attendance, EFC, financial need 

  • The amount of college aid, in addition to Title IV and state aid

  • The institution's outside scholarship policy

  • Availability of unsubsidized Stafford and PLUS loans

  • The college’s SAP policy

  • Availability of tuition installment plans

  • A few schools will provide FERPA, so communicate with your college and get details regarding it.

Components of the actual college cost you must consider comparing colleges.

  • Expenses such as tuition, fees, books, room and more.

  • Financial aid that you do not have to pay back, such as scholarships, grants, and work-study.

  • Financial aid that you will have to pay back, such as federal loans.

  • The amount you will have to pay out of pocket or with private student loans.


Know each institution's unique calculations for direct and indirect expenses, as well as what you will need to attend. Going through award letters and calculating charges certainly is not a fascinating work but all the effort you put into it will definitely save you some dollars and will be helpful. Choose the right college that is suitable for you and based on your financial situation.

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